A court decision upholding the controversial net neutrality rule dominated regulatory practice last week but only for a dearth of other news. Two proposed rules deserve attention: another proposal to limit arbitration and class action waiver clauses and a proposal to remove affirmative defenses in certain environmental litigation.
Net Neutrality Upheld: In a lengthy decision last Tuesday, the United States Court of Appeals for the District of Columbia Circuit upheld the Federal Communications Commission (FCC) net neutrality rule against a host of attacks in United States Telecom Association v. FCC. Whether called net neutrality, open internet, internet utility, or some other shorthand, the FCC’s In re Protecting and Promoting the Open Internet declaratory ruling and order (among other things) treats internet service providers as telecommunication service providers, i.e. utilities, rather than information service providers, fundamentally altering the nature of the business model to one that could become ratemaking. The 109-page opinion treads no new ground but rejects multiple statutory authority and Administrative Procedure Act (APA)-based arguments, and the 68-page concurrence and dissent disagrees with some application of precedent. Petitioners have suggested that they will seek further review, but the likelihood of success has declined.
► Bear in mind that this rule and decision reflect another step in a long process and while the final rule alters the landscape fundamentally, the internet remains a relatively short-lived phenomenon.
Of some interest, but not much, is the majority’s perception that “we do not sit as a panel of referees on a professional economics journal, but as a panel of generalist judges obliged to defer to a reasonable judgment by agency acting pursuant to congressionally delegated authority.” The dissent, on the other hand, examined the evidence and argued that the FCC’s judgment was not supported by evidence and therefore not reasonable. The dissent, for example, focuses on a lack of record support for the FCC’s paid prioritization ban, i.e. banning sale to sites of higher download speeds. The dissent points out that the FCC misapplied four economic studies, arguing that the studies do not support the FCC’s conclusion and the author of three of those studies actually filed comments opposing the proposed rule – and that the FCC never responded to that comment in the final rule. The difference of view here reflects the imprecision – and inherent judgment – in the standard.
One aspect of the FCC’s practice and the court’s decision deserves criticism: both continue to rely on the FCC’s byzantine record of its declaratory ruling and order, rather than the Federal Register promulgation of the rule. The court may have little choice, but the FCC does and it continues to use antiquated and self-centered docketing and publication practices. As the FCC now will regulate internet services, it needs to join this century and the common regulatory processes.
Student Loan De-Arbitration: The Department of Education (ED) proposed last Thursday to alter the terms of a number of student loan program regulations in Student Assistance General Provisions, Federal Perkins Loan Program, Federal Family Education Loan Program, William D. Ford Federal Direct Loan Program, and Teacher Education Assistance for College and Higher Education Grant Program. Key provisions would prohibit participating schools from using arbitration and class-action waiver clauses in student loan documents, require additional disclosures, establish uniform student defenses (pre-empting State law defenses), alter debt discharge requirements, and codify some existing policy into regulations. ED’s proposed rule argues that it has authority to and would impose conditions on institutional participation in the federal student loan programs, and such conditions include not using specific arbitration and class-action waiver contract provisions.
Public comments are due by August 1, and ED has stated that it expects to promulgate a final rule by November 1, 2016, to affect student loans disbursed after July 1, 2017. The 45-day comment period is shorter than normal and designed to help ED promulgate a final rule with an effective date prior to the end of the Administration.
► ED’s denigration of arbitration and class action waiver clauses will surely draw much attention. This question differs from the Consumer Financial Protection Bureau (CFPB)’s denigration of arbitration clauses in its proposed regulation of payday and title loans, but still rests on the issue of whether an agency may bar by regulation a provision that Congress has specifically favored in the Federal Arbitration Act. ED and CFPB are being consistent with the Administration’s animosity toward arbitration. The rule’s pre-emption of State law defenses in favor of newly created Federal student defenses raises further questions about ED’s authority, not to create a cause of action but to create new defenses to a debt collection action. ED’s schedule seems quite, perhaps too, ambitious.
Removing Affirmative Defenses: EPA proposed to remove the affirmative defense provisions for unavoidable malfunctions and emergencies found in its regulations for state and federal operating permit programs in the aptly titled Removal of Title V Emergency Affirmative Defense Provisions From State Operating Permit Programs and Federal Operating Permit Program. The D.C. Circuit previously held in NRDC v. EPA, that the Clean Air Act (CAA) precluded the EPA from promulgating affirmative defense provisions that a polluting source could use in civil enforcement suits – i.e. that the affirmative defense for private civil suits exceeded EPA’s statutory authority – and vacated the affirmative defense provisions that were the subject of that case. EPA is now rethinking the remaining line of affirmative defenses. Comments due August 15, 2016, could be quite interesting.
► Theoretically, if EPA had no statutory authority to promulgate the affirmative defenses, then the removal of excessive regulations would be non-discretionary and, therefore, not subject to APA advance notice and an opportunity for public comment rulemaking. However, EPA may have other alternatives and, particularly recognizing that some emergency operations may need shielding from too-enthusiastic citizen civil suits, may be seeking broader input. In any event, whether an affirmative defense is available or not, a district court retains discretion in the assessment of any penalties for violation of the CAA, so zealous enforcement has reasoned limits.
The post Monday Morning Regulatory Review – 6/20/16: Net Neutrality Upheld; Student Loan De-Arbitration & Removing Affirmative Defenses appeared first on Federal Regulations Advisor.